I wondering about the mechanics of putting replacement above upgrade in the queue. Say you have a situation where you have 50 regular and 50 reserve divisions on the map. The regulars have all their equipment but they were built first, so it's all weapon1. The reserves are missing a lot of equipment, and you are building weapon2's.
If you have replacement above upgrade, my sense is that your new weapon2's will go to the reserve divisions. The regulars would upgrade if there are any weapon2's left, but if you are in a deficit situation, there will never be any left after replacements.
On the other hand, if you put upgrade above replacement, the regulars get the first crack at the weapon2's. Since they have priority, they take up all the weapon2's during the upgrade phase, and dump a corresponding number of old weapon1's back into the equipment stockpile. Then during the replacement phase, the reserves draw the weapon1's.
The only wrinkle here would be if the limit on weapon availability was not production but transport through the supply system. If you divisions are deep in Russia, you probably don't want them using up limited equipment bandwidth drawing weapon2's and sending back old weapon1's. You want them to use replacement first, so they just draw weapon2's and keep the weapon1's.